The Guardian October 31, 2001

WTO: TNCs versus the people (Part 3)
Shutting government out

In Part 1 Anna Pha outlined the origins of the World Trade Organisation 
(WTO) and the basic principles of its agreements. In Part 2 she looked at 
the Agreement on Trade in Intellectual Property Rights (TRIPS) and some of 
its consequences. This week she looks at the General Agreement on Trade in 
Services (GATS) and some of its implications.

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In the last decade there has been a rapid explosion in foreign direct investment as transnational corporations have spread their tentacles around the globe looking for new markets and new sources of profit. Third World countries have been pressured into lifting restrictions on foreign investment by the IMF, the World Bank and at the WTO. They had been promised foreign investment and the technology necessary to develop their own economies and feed their people promises that have not been delivered. Last year 80 per cent of foreign investment flowed into the developed countries and over 90 per cent of it was used in takeovers and mergers, not new productive job-creating investments. The massive surge in takeovers and mergers reflects not only a process of monopolisation which is accelerating, but also the difficulties that the transnational corporations (TNCs) face in finding markets for their good and services. It is proving more profitable to takeover existing ventures than establish new productive enterprises, particularly in poorer countries where few people have the means to purchase what is produced. Even in the wealthier industrialised countries where wages have now been suppressed and productivity increased, there is an oversupply of goods and services a classic capitalist crisis of over production. New source of profits There is however, one area of the economy, and a very large one, which the transnationals have not had access to in the past it is the public sector. In many countries, the public sector plays an important role in the provision of health, education, social security, telecommunications, transport, postal, banking and other services. Global spending on health is estimated to be worth US$3.3 trillion per annum, on education around US$2 trillion, on water US$1 trillion. Around 30-40 per cent of economic activity (GDP) of the wealthier countries is carried out by the public sector. In Australia, spending on public education and public health services is equivalent to almost 10 per cent of GDP, and in many European countries it is in excess of 15 per cent of GDP. Hence the TNC's drive to privatise public services. To achieve their ambitions, it was necessary to overcome several "barriers". The first is that services such as education or health are not tangible commodities that can be packaged in a box and shipped overseas. It is necessary to be on the spot to supply the service. The second is public opposition to privatisation and foreign ownership of essential services. One of the main aims of the General Agreement on Trade in Services is to overcome these problems and open the way for privatisation and foreign ownership of the public sector including many functions of government. No going back The General Agreement on Trade in Services contains specific commitments to market access and so-called national treatment which gives foreign corporations the same or no less favourable treatment to that given to domestic companies. It applies to specific services that governments list in schedules attached to the agreement. The negotiation of GATS is an ongoing process with member countries gradually adding to their schedules and phasing in their commitments. Once a commitment is made, there is no going back on it. Governmental authority undermined In practice, public services have been corporatised and the private sector given a role through contracting out, competitive tendering and deregulation. Health, education, telecommunications, postal services, electricity and water are supplied on a for-profit basis, the private sector competing with the public sector or the public sector being completely taken over through privatisation. "Competition policy" is used to introduce private ownership into areas where the public service previously was the sole provider. The former Labor and the present Coalition Government have done a great deal of the preparatory work to sign onto more areas of GATS. Challenge to sovereignty The question of whether to make all areas of GATS compulsory was on the agenda at the aborted Seattle ministerial meeting in 1999 and is on the agenda for the Doha ministerial meeting in November. At present governments choose which sectors will be included in their schedules, and how much of each sector will be subjected to GATS rules. For example, the government can set rules to prevent or limit foreign ownership, for specific services such as we have in the media and finance sector. The right of governments to retain national sovereignty over public services and make their own domestic regulations in pursuit of public policy objectives, such as universal health care or social security, is one of the main areas that the US, the EU, and the TNCs are challenging. Not just a trade agreement GATS brings governments into conflict with the principles of universal coverage in areas such as health, the practice of cross-subsidisation, (e.g. uniform pricing of postal services around Australia) and government subsidies. Under GATS if a government signs up to the education or health schedule, then any funding it gives to public hospitals or public schools must also be available on an equal basis to all foreign private companies. GATS has serious consequences for the right of governments to make regulations and pursue social equity policies. The term "restricting trade" is used and means any measure that restricts the opportunities for corporations to enter that field. WTO bodies and WTO rules, not governments or the people, decide what is of public interest or public necessity. When, for example, France attempted to ban the import of asbestos, an extremely hazardous and dangerous material, France was taken to the WTO and challenged. A WTO committee collected its own evidence on asbestos and made the decision on whether or not it was a hazardous material and whether or not the ban served a legitimate objective or constituted some form of protection. GATS directly challenges the principles by which governments have provided to all citizens, free or subsidised health, education, community, transport and other services. Radical changes in the role of government Scott Sinclair, a Canadian specialist in trade policy says: "despite the breakdown of global trade talks in Seattle in December 1999, negotiations are now underway at the WTO to radically restructure the role of government worldwide subjecting an ever greater degree of governmental decision making to oversight by the WTO. "Essentially unknown to the public, the agreement is designed to facilitate international business by constraining democratic governments", and the talks "are taking place behind closed doors in close consultation with international corporate lobbyists", said Mr Sinclair. "The agreement is designed to help transnational service corporations constrain and override democratic governments ... and its ultimate purpose it to commercialise every service sector in every WTO member country, including essential public services, such as education, water and health care." (140 countries are involved.) GATS deals with every service imaginable and applies to measures at all levels of government federal, state and local. "Additional constraints being discussed now on domestic regulations are amongst the most serious new threats to the democratic rights of elected governments", said Mr Sinclair.* If the US, EU, Japan and Canada get their way, then GATS will be amended so that it can be used to overturn virtually any legislation in any member country. Power and decision making over essential services, their prices, their availability and their distribution will be solely at the discretion of powerful TNCs and the WTO which does their bidding. Privatisation and deregulation result in higher prices as layers and layers of profit are introduced, and competition leads to monopolisation and monopoly pricing. Services deteriorate and those who cannot afford to pay are denied access to them. This was seen with the privatisation of electricity in South Australia, where prices rocketed in comparison to other States, and blackouts have become the norm. The TNCs taking over water, electricity and other crucial infrastructure expect profits at the rate of 25 or 30 per cent per annum! They restructure, they sack workers, they attack wages and conditions, services deteriorate and the whole community suffers. Governments are obliged to ensure that "measures relating to qualification requirements and procedures, technical standards and licensing requirements do not constitute unnecessary barriers to trade". Governments would lose the right to determine industry policy, to provide basic social security for their people, or govern in the interests of their people. They would be denied the right to assist the development of locally owned services or control foreign ownership. The public sector would be crucified as TNCs move in unrestricted, unhindered with the WTO, IMF and World Bank to back them up. Opposition Third World countries, NGOs and many others around the world are strongly opposed to the West's plans for the expansion and enforcement of GATS' provisions. They have many legitimate concerns, above all, the loss of sovereignty, the inability of governments to develop policies, to control the direction of the economy, to control prices, direct subsidies, plan, and deliver social security to the people of their countries. Chakravarthi Raghavan, writing in Third World Economics (1-15/3/01) said, "In this situation, a country's entire future economic policy and sovereign rights would be 'mortgaged' at the WTO in effect establishing a colonial relationship".
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* GATS: How the WTO's new "services" negotiations threaten democracy", study by Canadian trade policy specialist Scott Sinclair, published by Canadian Centre for Policy Alternatives. Next week: North vs. South at Doha a new round of negotiations or resolution of implementation problems of previous rounds?

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